_Budget 2017: Initial reaction

Stamp duty

From November 22nd, stamp duty will be abolished up to £300,000 for first-time buyers purchasing a home worth up to £500,000 in England Wales and Northern Ireland. 

Grainne Gilmore, Head of UK Residential Research, says: “This is a step-change for first-time buyers, recognising the challenges that those trying to climb onto the property ladder face in saving for a deposit. Any relief from an additional expense is to be welcomed. Around 340,000 first time buyer mortgages were taken out to purchase property in 2016. 

"The Chancellor estimates the move will cost £3.2 billion over the next five and a half years, but he has room for manoeuvre here, as stamp duty receipts from residential property were £2.2 billion higher in the year to Q3 2017 compared to the annual receipts in 2014. 

"First-time buyers purchasing a £200,000 home will now save £1,500 in stamp duty, while those purchasing a £450,000 home will save £5,000. 

"It may be nearly ten years since the financial crisis, but the new mortgage lending model brought in after the financial system is here to stay – meaning that those climbing onto the property ladder are having to source much larger deposits than they did pre-2007. Anything which cuts the financial pressure for potential purchasers trying to bridge the ‘deposit gap’ can only help.

"Policymakers may want to turn their attention to the rest of the market next, as there is evidence that movement up and down the housing ladder by ‘home-movers’ is also hampered by the cost of stamp duty.”

^{Source: HMRC}

Council Tax

The Chancellor announced that local authorities would have the power to increase the empty homes premium from 50% to 100% of Council Tax in a move designed to raise £10 million by 2023. Councils can currently charge the premium if homes have been empty for two years.

Housebuilding

The Chancellor stressed that there was no ‘magic bullet’ to solve the housing crisis – and as such he announced a raft of new funding and new consultations.

The £44 billion housing package included £15 billion of new support for house building during the next five years, and the funding is split between a raft of measures that include loans to small and medium builders, remediation of brownfield land and grants to local authorities for infrastructure to unlock housing. 

However, he also made a firm commitment that there would be no development on Green Belt, despite calls for targeted development on localised fringe sites to make the best use of existing amenity and infrastructure.  

In addition, the Chancellor had already announced an extra £10 billion for Help to Buy Equity Loan, but there was no clarity about what will happen to the scheme after it is due to end after 2021, which may cause some disappointment. 

The Chancellor also announced a review into the gap between planning permissions granted and houses being built - which is due to take place next year. 

Key among the other announcements:  

• Home Building Fund: An additional £1.5 billion will take the Home Building Fund to £4.5 billion. The increase will be used for loans to SMEs who cannot access the finance they need to build homes. The Treasury intends to phase the handouts, starting with £365 million in 2018-19. 
• Infrastructure and remediation for small sites: the Chancellor has allocated £630 million that will be issued in the form of grants for remediation and infrastructure to accelerate the construction of homes on small and stalled sites. Funding for the clean-up in the form of contaminated land capital grants has been declining steadily since its peak of £17.5 million in 2009/10. It was due to be phased out from April 2017, according to a 2016 report by the environmental audit committee.
• Local Authority housebuilding: A £1 billion allocation to enable councils to build new homes. This is in addition to the £2 billion pledged during the Theresa May’s party conference speech in October, intended to be spent on a “new generation” of council houses and affordable homes for rent.
• Extended Housing Infrastructure Fund: an extra £2.7 billion made available in the form of grants to local authorities for strategic infrastructure that unlocks new housing. The fund, now standing at £5 billion, enables local authorities to bid for cash to either a Marginal Viability Fund, to provide final or missing pieces of infrastructure to unlock sites, or a Forward Fund, for a small number of high-impact infrastructure projects. 
• Land Assembly Fund: £1.1 billion to aid in assembling fragmented pieces of land into ready to go sites for developers to build homes on.
• Estate Regeneration: £400 million to transform run-down estates and provide more housing.

New financial guarantees: £8 billion to support private sector housing building. The initiative started in October, when the British Business Bank agreed a guarantee with United Trust Bank to allow it to increase the development finance it offers to small and medium sized home builders. 

The Chancellor is also going to consult on changing the planning system – specifically looking at land identified for development within local plans.

It will examine whether land should be removed if there is little chance of development, and adding in additional sites where discounted properties for first-time buyers or affordable homes are being offered. 

There will also be a consultation on introducing minimum densities for development in cities around transport hubs and a special permitted development right to turn commercial land into residential – underlining the Chancellor’s plan to boost development in urban areas where housing is most needed. 

An announcement that more strategic and zonal planning approaches will be taken by the Government will be taken, especially around the Cambridge - Milton Keynes – Oxford corridor, with a pledge by Oxfordshire to deliver 100,000 homes by 2031, perhaps signals a more regional approach to planning in a bid to build more homes. The Budget says that the Government is “continuing housing deals with Greater Manchester, the West Midlands, Leeds and the West of England. 

There was also a welcome announcement that the Government will lift the borrowing caps in councils where there is affordability pressure to allow them to build more council housing. 

Prime markets

Tom Bill, Head of London Residential Research, says: “For the prime London property market, no news in today’s Budget was good news. 

"While the Chancellor announced a stamp duty cut for first time buyers he maintained the status quo for the rest of the market.

"Following more than 25 tax changes in recent years that have affected the prime London residential market, the absence of any further measures will inject a degree of certainty, particularly now there is only one Budget per year.

"There is anecdotal evidence to suggest that some buyers had been holding off for today’s Budget in the belief that stamp duty rates may change. Early indications following the Budget suggest such transactions are now likely to proceed as originally planned.

Meanwhile, the Chancellor’s longer-term focus on maintaining the UK’s leading position in the technological revolution is a positive signal for the prime sales and lettings markets in London.

This is because the reliance on financial services as a source of demand is quickly evolving to include tech companies, many of which are significantly boosting their UK presence.

All of which suggests that the economic and political backdrop will continue to have the biggest impact on the prime London market in the short-term. In this sense, eyes should arguably be turned towards events in Berlin this week rather than Westminster.”

Geospatial data commission 

The Government is to launch a Geospatial data commission to help release publicly-held geospatial data. Ian McGuinness, Head of Geospatial at Knight Frank, says: “The funding for this commission is welcome. In its strategic co-ordination role, the Commission will formulate a plan to bridge the information gap between different public sector bodies, and also between these public bodies and the private sector, including developers.

"This may be a response to a call from the British Standards Institute (BSI) who say this kind of information-sharing can stimulate the economy.” 

Further reaction to the Budget will be available throughout the day on the Knight Frank blog, including a  break-down of the Office for Budget Responsibility’s outlook for housing here.